IRS finalizes rules on relief from failure to file GRAs

The IRS finalized proposed regulations to update the rules that apply to U.S. taxpayers that fail to file gain recognition agreements (GRAs) when they transfer certain property to foreign corporations in nonrecognition transactions (T.D. 9704). The rules change the standards under which transferors are required to recognize gain on the transfer of stock or securities.

Under Sec. 367(a), if, in any exchange described in Sec. 332, 351, 354, 356, or 361 (i.e., a nonrecognition transaction), a U.S. person transfers property to a foreign corporation, the transferee foreign corporation is not considered to be a corporation for purposes of determining the extent to which gain is recognized on the transfer. This results in the transferee’s recognizing gain. Read more on the Journal of Accountancy.